On Thursday, CFRA, a financial research firm, updated its outlook on AFLAC Incorporated (NYSE: NYSE:AFL), raising the 12-month price target on the stock to $87 from $82. The firm maintained a Hold rating on the shares.
The adjustment reflects a valuation of 12.8 times the anticipated 2025 operating earnings per share (EPS) of $6.80, which has been increased by $0.20, and 13.5 times the projected 2024 operating EPS of $6.45, up $0.10 from previous estimates.
The new price target compares to AFLAC's one-year average forward (P/E) multiple of 12.4 times and is notably higher than the average forward multiple of 8.3 times for a group of life insurer peers.
CFRA's outlook is based on expectations of sales growth in Japan, AFLAC's primary market, which is projected to increase by 1% to 3% in 2024 and by 2% to 5% in 2025. The firm also forecasts a 2% to 4% annual rise in U.S. sales for the same periods.
The forecasted growth rates align with the general revenue growth in the life insurance industry. However, they also take into account some of the challenges AFLAC has faced in expanding its distribution platforms recently. CFRA's analysis suggests that at the current price levels, AFLAC's stock is fairly valued when compared to its peers and historical averages.
The firm also highlighted the significant influence of yen-dollar exchange rates on AFLAC's financial results. In 2023, the operating EPS of $6.23 included a negative impact of $0.19 per share due to the relatively weaker yen against the U.S. dollar. This currency fluctuation is an important factor for investors to consider, as AFLAC operates extensively in Japan and currency movements can materially affect the company's earnings.
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